Getting Risk Governance Right

13 Pages Posted: 26 Nov 2017

See all articles by Thomas Huertas

Thomas Huertas

Goethe University Frankfurt - Institute of Law and Finance; Center for Financial Studies

Date Written: March 21, 2013


This paper sets out the criteria that boards and supervisors should use to determine whether banks are governing risk correctly. First, boards have to set an overall risk target consistent with the overall return target. Second, the bank’s business model has to set a risk capacity and risk appetite that can enable the bank to meet its target for risk and return. Finally, the bank has to ensure that its three lines of defense (management, risk management and compliance, and internal audit) function well, both singly and in combination.

JEL Classification: G21, G28, G30, G32, G38

Suggested Citation

Huertas, Thomas, Getting Risk Governance Right (March 21, 2013). Journal of Financial Perspectives, Vol. 1, No. 1, 2013. Available at SSRN:

Thomas Huertas (Contact Author)

Goethe University Frankfurt - Institute of Law and Finance ( email )

Campus Westend - Grüneburgplatz 1
Frankfurt, 60323

Center for Financial Studies ( email )

Grüneburgplatz 1
Goethe University
Frankfurt am Main, 60323

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